16 September 2016 4:21 PM

Saturday PS: Long time coming

USURY, the lending of money at interest, was deprecated by the three great Middle Eastern faiths, Judaism, Christianity and Islam – in the last case, it still is.

Well, talk about a long time coming but could the holy men of old be about to get their way?

The Bank of England met this week and decided to leave the official Bank Rate where it is, although there are suggestions it could be cut again before the end of the year.

The current rate is 0.25 per cent, and if it happens the new rate would be 0.1 per cent. To put that in perspective, Margaret Thatcher’s 1987 election triumph, against a successful economic background, coincided with a rate of 8.8 per cent.

True, inflation was four per cent then and is just 0.6 per cent now, but even so, the “neutral” rate of interest, the level at which it is neither stimulating the economy nor trying to cool it down, is usually figured out by adding the “trend” rate of growth to the broadest measure of inflation, the GDP deflator.

This was running at just 0.1 per cent a year in the first quarter of 2016, the latest reading (the data take ages to collect), but even so that would give us, in normal times, a base rate of about 2.5 per cent, ten times the current level.

Meanwhile, Janet Yellen, chair of the Federal Reserve Board, recently suggested that America’s neutral rate had shifted somewhat. Traditionally calculated as being about three or four per cent plus the Fed’s two per cent inflation target, she hinted it could not be the inflation target plus…er, zero.

Meanwhile, something like $13 trillion-worth of government bonds worldwide are delivering negative yields – that’s right, lenders are paying to lend – and both the Bank of Japan and European Central Bank provide negative interest rates for those banks wishing to use their deposit facilities.

All this says that the world’s central bankers believe the global economy is deeply disturbed and quite incapable of taking any strain in terms of even moderately normal rates (for the record, the US federal funds rate is set in a range of 0.25 per cent to 0.5 per cent). This is turn makes it rather difficult for banks to make money out of lending, because it compresses the “spread” between what they have to pay for capital and what they can charge for lending.

And that in turn makes it harder for anyone to make money out of lending. Maybe they will have instead to buy stakes in productive enterprises and take their chances alongside those who own and work in them.

As for the ordinary bank customer, it is indeed galling to see the interest rate on their account dwindle. Worse to face the prospect of a “negative rate”, essentially a charge for looking after their cash.

But on the bright side, banks would no longer need to try to “monetise” (yuk!) their customers by selling them life-assurance products.

Economical with the economicalities…

I am a truth-teller, you dissemble, he is “post-truth”…on September 10, The Economist devoted its first leader and an inside report to bemoaning the spread of lying, especially in politics. Everyone, it seems, is at it.

Well, not quite everyone. Donald Trump (natch) is singled out in the leader as a mass-producer of pork pies, but there is alas no space for his opponent’s serial dishonesties. Britain’s Leave campaign is (ditto) excoriated for warning of the “hordes of immigrants that would result from Turkey’s imminent accession to the union” but there was, alas, no room for David Cameron’s having (a) championed consistently fast-track Turkish membership right up to the referendum and then said (b) it would not happen for simply yonks.

The Leave campaign got another tonking but no mention of the lies of Remain’s Project Fear.

Maybe the report inside is more balanced, although a quick skim suggests not.

To be fair, The Economist does acknowledge that “sore losers have always accused the other lot of lying”.

Quite.

Man (non) management

THE other night I came across a repeat of an episode of the long-running New Tricks, jolly TV tale of superannuated coppers recalled to solve ancient cases. True to form, the boss’s own boss, “Mr Strickland” (Anthony Calf) got very shirty with the team and practically told them to drop the case before being forced to admit that they’d done a fair-ish job.

There’s a long-standing convention here. The ace detective or detectives end each episode having been proved right but by the start of the next one they are being treated as wayward idiots once more.

Think of the not-very-creative tension between “Mr Haskins” (Garfield Morgan) and Jack Regan (John Thaw) in The Sweeney. Or more recently, the hostilities between the title character in A Touch of Frost (David Jason) and “Mr Mullett” (Bruce Alexander).

A key part of this convention is that, eventually – very eventually – the Top Plod warms to his team, and vice versa: true of Strickland, Haskins and Mullett. True also of the chocolate-bar scoffing Captain Dobey (Bernie Hamilton) in the original Starsky and Hutch.

Two exceptions come to mind. One is Softly Softly where the ace detective Charlie Barlow (Stratford Johns) was himself very senior, thus his boss had to be even more so, assistant chief constable Austin Gilbert (John “I didn’t get where I am today” Barron) – from memory they had a fairly cordial relationship.

The other is Kojak, whose eponymous hero’s boss Captain McNeil (Dan Frazer) is well-disposed if exasperated by his crime-busting lieutenant. On one occasion Kojak rings in and tells McNeil gleefully that the bad guys “have no idea what we are doing”.

Replies McNeil: “Do we?”

Telling it like it is

THE Hinckley Point decision, as seen by China’s official Xinhua news agency:

BEIJING, Sept. 15 - Finally, London has made a welcoming move by giving the go-ahead order to a key nuclear power plant programme after it was suspended over some fictitious "national security" concerns about Chinese investment.

Saturday miscellany

HAS anyone else pondered the sight of two nationalised industries – the BBC and Channel 4 – scrapping over The Great British Bake-Off? Elsewhere in the public sector, the NHS seems to have evolved a new ritual, akin to Black Rod’s role in the opening of Parliament. Once a year, NHS grandees declare the service to be at breaking point. Ministers bunce up some more cash, which is duly pocketed with a further warning that it will prove “only a sticking plaster”. We British are so good at this sort of pageantry.

Good to see George Osborne sticking with his best idea as Chancellor, the Northern Powerhouse, and launching a think-tank to that end. My only concern was the “metro mayor” new tier of local government apparently involved, but I’d be happy for a single elected figure to oversee the whole project with very limited but deep powers (over say transport, energy and nothing else) as opposed to vaporous “strategic responsibilities”.

I look forward to Mr Osborne as Governor of the North.

Finally, it would be unfair not to note that the same edition of The Economist was spot on here:

“Companies rightly think that the elixir of growth in a world where computers can do much of the grunt work is innovation. But they wrongly conclude that the best way to encourage creativity is to knock down office walls and to hold incessant meetings.”

Thanks again for reading and enjoy the weekend.

dan.atkinson@live.co.uk

Europe Isn't Working, by Larry Elliott and Dan Atkinson is published by Yale University Press